Florida regulators delay approving Duke's fuel cost recovery request

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Dive Brief:

Florida regulators this week declined Duke Energy's request to add $4.70/month to customer bills in response to higher fuel costs that have left the utility underrecovering by about 13.6%, according to SaintPetersBlog.

But that could mean even greater rate shocks for customers down the line—the Public Service Commission said any recovery increase will need to wait until next year, possibly alongside another $4.25/month increase to pay for a Citrus County gas-fired plant.

Staff of the PSC had supported Duke's request, noting that "mid-course corrections are considered preliminary procedural decisions" and that Duke's request is "reasonable in this instance."

Dive Insight:

Mid-course corrections to adjust for fuel costs are not unusual and staff of the PSC had recommended approval of Duke's adjustment. But regulators decided to wait until this fall in hopes that some of the increase would be unnecessary.

The utility “wanted to smooth it out," Deputy Public Counsel Charles Rehwinkel told SaintPetersBlog. "And the commission said, 'No, we’d rather just look at it all in the upcoming hearing in the fall, and see it there are offsets. And maybe we can look at your projections and see whether you are projecting something wrong.'"

Last month, however, PSC staff had recommended approving the utility's proposal.

"Staff believes implementing the mid-course correction as proposed by [Duke Energy Florida] is reasonable in this instance," staff said in a May 24 memorandum on the case. "DEF’s proposed methodology provides for a lower bill to customers in the near term compared to recovering the costs over a shorter period."

Whether the mid-course correction is implemented over the remaining months in 2017 or is extended into 2018, staff noted that "a carrying charge on the unrecovered balance will be incurred."

Duke has originally expected natural gas prices to average $2.92/MMBtu this year, but prices have risen closer to $3.10MMBtu, an increase of more than 6%. Gas-fired generation makes up more than 70% of Duke's Florida generation. Coal, which makes up the balance of the utility's supply, also rose about 5.6% on a per-MMBtu basis.